Hindenburg receives notice from SEBI over Adani short bet

SEBI’s Notice: Hindenburg Research, a U.S.-based short-seller, announced on Monday that India's securities regulator, the Securities and Exchange Board of India (SEBI), had sent a letter outlining suspected violations related to its short bet against the Adani Group last year. Hindenburg disclosed that it may "barely come out above breakeven" on this trade.

In its statement, Hindenburg revealed that Kotak Bank, an Indian firm, created and oversaw an offshore fund structure used by its "investor partner" to bet against the Adani conglomerate. This new detail has puzzled investors. Hindenburg reported earning $4.1 million in gross revenue through "gains related to Adani shorts from that investor relationship" and an additional $31,000 through its short position on Adani's U.S. bonds, though it did not disclose the identity of the investor.

Hindenburg characterised SEBI's "show cause" notice as an attempt at intimidation, stating that the regulator had made "nebulous allegations" that Hindenburg's report contained misrepresentations and inaccurate statements intended to mislead readers.

"In our view, SEBI has neglected its responsibility, seemingly doing more to protect those perpetrating fraud than to protect the investors being victimised by it," Hindenburg asserted.
Requests for comment from SEBI, Adani Enterprises, and Kotak were not immediately answered outside working hours. SEBI has also been investigating Adani, with India's top court granting it until August 14 to complete its probe.
The disclosure of SEBI's notice adds a new twist to the ongoing saga that began last year when Hindenburg, founded by Nathan Anderson, accused Adani of improper business dealings. Adani refuted these allegations, yet the group suffered a loss of up to $150 billion in combined market value following the report. However, the company has since rebounded.

Hindenburg's response provided further insight into the mechanics of its trade, which had intrigued other investors due to Indian securities rules that make it challenging for foreigners to bet against Indian companies.

"It was a tiny position," Hindenburg stated. "But, to date, our research on Adani is by far the work we are most proud of."

With Reuters Inputs